by E. Zachary Knight on April 2, 2009

Digital Rights Management, DRM, ECA, EULA, FTC, MPAA, Sony BMG

“Whether you view DRM as good, bad, or neutral one thing is certain, it does impact consumers.” Truer words have never been spoken. Those words were part of the introduction to the FTC’s Digital Rights Management Conference held last week. This conference was held as a fact finding mission by the FTC to discover what the impact was on consumers who use products containing DRM.

This conference took place in four parts. The first part of the conference covered basic facts of DRM and how it effects consumers. The second part discussed the legal matters revolving DRM. Part three held discussions on the potential benefits and complications that arise from DRM. Panel four debated on the need to better standardize the process of disclosure of DRM. Finally, panel five held discussions on rising technologies and marketplaces.

From this conference two things were made clear, consumers need more information when it comes to what DRM the products they purchase have as well as what impact they will have and consumers need better protection from DRM that fails them either through technical or commercial problems.

Panel one started off with a brief recap of the Sony Rootkit fiasco. Sony BMG had implemented a CD copy protection scheme that when a CD was inserted into a computer drive it immediately installed DRM that not only prevented the user from copying the CD but also disabled applications and hardware that the consumer used. The DRM also gleaned some private information from the user’s computer and sent it back to Sony. The FTC then took legal action against Sony for this and now Sony is required to disclose all DRM they use on their products.

A lesson to be taken from the Sony case is that sellers who use DRM technology to enforce the terms of bargains with consumers need to be particularly careful to disclose in advance all material terms so that consumers can make informed choices. As FTC Commissioner Thomas Rush (ph) said when speaking about DRM back in March of 2007, any material limitations on use rights including, but not limited to technological limitations such as an inability to use the media on another platform must be clearly and conspicuously disclosed before a sale of those media is made.

The rest of the panel was spent discussing how important it is to disclose the use of DRM to consumers. Of course not everyone was in agreement that businesses should disclose DRM. Fritz Attaway from the MPAA felt that the current marketplace provides adequate information and protection for consumers:

But the need to inform consumers must be balanced with the goals of standing consumer choices and encouraging technological innovation. As DRM technology becomes more and more sophisticated and brings more and more choices to consumers, asking a fully informed consumers how that technology works becomes more challenging. For the most part, I think the marketplace will ensure that consumers are not deceived. Business models that do not deliver the product or service offered consumers and that consumers expect will fail. One of the good things about the age of viewing abundance is that consumers that are dissatisfied with any particular viewing option, can turn to other options that provide greater satisfaction.

Jason Schultz of Berkeley Law School made the observation that it is often not clear what impact DRM has even to the most educated of consumers. To illustrate this point he shared the experience of two prominent world leaders:

Maybe some of you have saw the recent story about our president giving the gift to the head of the British government, a series of DVDs that would not play on the region player in that country, will see that even the smartest among us would have some understandings about these things. I’m not saying that’s an empirical study, but that’s an interesting anecdote when the heads of states who are trying to solve all of our world’s problems don’t actually understand the limitations on their DVDs.

Is there any hope for the lay people among us?

Panel four continued this theme. Starting the discussion off was David Sohn of the Center for  Democracy and Technology. He started off with the idea that DRM only a matter of ensuring that consumers know their rights and limits with the products the use. He believes that DRM should only be disclosed if it functions in a way that is outside consumer expectations.

Next was Hal Halpin of the ECA. He also spoke on the need to disclose DRM to the consumer so that when they go to the store to purchase a game, they can tell by looking at the box what kind of restrictions are included with the game. He also spoke on the need to standardize EULAs. Unfortunately, the transcripts for his comments were incomplete but lucky for us, Arstechnica was able to get the word directly from Hal:

The second thing that we recommended was that EULAs get standardized, so again, rather than have 30 or 40 types of agreements, there would be one standard one for all different types of computer games. People go into the store, buy the game, open it, and they can no longer return it… by standardizing the EULA, consumers will have the confidence to know what it is they’re agreeing to before they buy the product.

That didn’t go over so well. There was a room of attorneys that kind of gasped when we suggested standardization. One panelist commented that the EULA really were there as consumer information, and that was the one and only time that the FTC jumped in and said ‘wait a second, this has nothing to do with consumer information, this is purely IP protection.’ I pointed out that when we ran the IEMA (Interactive Entertainment Merchants Association) we were able to get the size of the boxes standardized, and to get the PC CD-ROM logo on the box. These were not herculean undertakings, and they didn’t require legislation. So if we can do those things, then certainly we can do these.

From these two panels it is quite clear that there needs to be better lines of communication when it comes to DRM. Whether that is through labeling on the packaging or standardized license agreements, it needs to happen.

Finally, there comes the point of what should be done with DRM laden products when the service that runs the DRM no longer functions. Nothing brought this closer to reality than when Yahoo and Microsoft announced they were closing their music servers and were no longer going to be able to validate music people had purchased from those servers.

So what can be done to prevent unexpected losses of service such as bankruptcy or other losses of business? One suggestion from the last panel was that all DRM should be documented with the FTC. Meaning all keys and such should be handed over to them for safe keeping as well as continued service after the company is gone.

Another suggestion was that all DRM should include an expiration date, meaning that after such a date, the DRM will no longer require activation, but will be permanently disabled. Included with this suggestion was that any company using DRM should create a D-day type patch that if anything were to happen to the company, they can release this patch and remove the DRM from all their products. Such a patch would be something that the FTC would be able to keep as well.

This conference was extremely exciting to hear and I wish I could related everything in this single article, but there is so much to discuss. But I am glad that the FTC, businesses and consumers are actually sitting down and discussing the impact of DRM. That is the most important part. Nothing will ever get done if we don’t have such debates. Hopefully we will soon see better disclosure of DRM and standardized licenses for consumers.

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